Amending the State Constitution to Advance Reform in Property Tax Administration

Professor's Piece: 

Amending the State Constitution to Advance Reform in Property Tax Administration

Gerald Benjamin and Kayana Sabo

November 16, 2011

New York State’s Office of Real Property Tax Services describes ours as the most complex property tax system in the nation.[1] In all counties but Nassau and Tompkins, assessment is a town and/or village function. Thus, while most states have fewer than 100 assessing units, New York has 1,100. Of these, 88% had appointed assessors in 2010 and 12% elected assessors. New York State law requires that assessments are to be made at a uniform percentage of market value each year. However, this applies only to “each assessing unit”, leaving room for large discrepancies in property tax rates from municipality to municipality.[2] Moreover, the multiplicity of types of local governments that rely on the real property tax, combined with non-coterminality of the boundaries of taxing and assessing units, requires a major state equalization effort to assure great fairness in the distribution of the tax burden.  Nonetheless, disparities in tax treatment among property classes continue to widen.[3]  In 2011, the Council of State Taxation, a business supported group, ranked New York State worst in the nation in property tax administration.[4]

In 2008, Assemblywoman Sandy Galef (District 90, Westchester County) sponsored a constitutional amendment that would make possible a far less complex system of property assessment. Bill number A01572 (Senate companion bill S02683 sponsored by Senator Betty Little) sought to “institute a system of uniform real property assessments, uniform assessment cycles and county administration of tax assessment.”[5] Instituting such a system in New York creates several advantages for local governments, but also, some think, disadvantages.

One advantage to consolidating assessment services under county administration is a savings in cost. In 2009, $132 million was spent on tax assessment in New York State.[6] According to a study conducted by the New York State Office of the State Comptroller in 2011, local governments could save as much as $12.5 million by improving assessment practices and sharing this function among municipalities.[7] Moreover, by pooling resources, smaller towns and villages may have the means to establish a more professionalized body of assessors, thereby improving assessment efficiency and quality. A 2008 study on the political economy of the property tax, presented at a National Tax Association conference, concluded that county assessors generally do a more uniform assessment job than do local assessors.[8]

Though the amendment proposed by Assemblywoman Galef does not specify how often ‘uniform assessment cycles’ should take place, it is important to note the cost-saving advantages of regular assessments. Local governments with outdated assessments are more susceptible to lawsuits, known as Tax Certiorari Proceedings. Court-ordered assessment reductions and settlements of these lawsuits shift the property tax burden onto the remaining tax base, raising tax bills for all taxpayers.[9] (Counties where 90 percent or more of municipalities had reassessed since 2005 had roughly 4 tax certiorari proceedings per 10,000 parcels, compared to 18 per 10,000 parcels among counties where only 50% or less had reassessed).[10] Moreover, longer assessment cycles can be troublesome when property values increase rapidly because several years of property appreciation can cause large increases in property taxes without a concomitant reduction in rates. While frequent reassessments may increase costs in the short-term, if counties with above average certiorari proceedings could reduce the frequency of these lawsuits, estimated savings could range from $5.1 million to $7.7 million statewide.[11]

Efforts are already being made throughout the state to establish a more uniform standard of assessment. The Real Property Tax Administration Committee (RPTAC), made up of representatives of the New York State Assessors Association, the New York State Association of Directors of Real Property Tax Services, and the Office of Real Property Tax Services joined in a set of recommendations to the State Board of appropriate Uniform Assessment Standards. According to the committee, uniform standards would establish “equitable” and “transparent” assessments by ensuring that all properties are assessed at full market value and creating a tax system that is easily understood and accessible by taxpayers.[12]

With today’s technological advances in computer software systems, establishing a uniform and common property tax management system using web-based technology could “help eliminate duplicative work in several county offices, permit prompt and accurate local and state information exchange, and make quality control feasible”.[13] Furthermore, for local governments, ‘accurate and readily available information’ can help these municipalities make more informed decisions. At the state level, ‘management of the statewide process and interaction with counties’ can lead to better accounting and capturing of costs.[14]

Opponents of assessment reform include those that are content with, or are advantaged under, the current system. Typically, opponents argue that uniform assessment will not reduce costs and see county level assessment as a superfluous expense for the county. County-level assessment has also been criticized as being more remote and bureaucratic than town and village level assessment, with decreased local access to assessors. In Fulton County, for example, efforts at reform have been repeatedly thwarted by local leaders who were characterized in the press as “too concerned about their own personal stakes and provincial interests to make a sincere attempt at consolidation”. [15] More positively, some Fulton County residents said they preferred to “retain a close personal connection with their assessors” and maintain high levels of assessor accountability to property owners.          

In 2008, Sullivan County conducted a study of its current assessment system and alternatives that might improve its performance. The study looked at Tompkins County’s assessment model as an example. Tompkins is one of the only two counties in New York that assesses at the county level. Since 1970, the Tompkins County Assessment Office has been performing county-wide assessments. Prior to consolidation the county had 20 assessors (appointed and elected) working part time. Today, there are five professional full-time assessors that provide quality service to taxpayers. Benefits of this approach include the equity and uniformity that come with a single assessment unit, one equalization rate, one level of assessment and one reassessment schedule for the county.[16]  However, drawbacks to applying this model, the Sullivan County study found, include high start up costs, increased costs to the county for assessment services (assessment vehicles, satellite offices, etc.), and limited public accessibility to assessment functions (especially in rural areas with large populations and limited public transportation).[17]

Currently the state constitution requires “dual majorities” in referenda for shifting a governmental function from one class of local government, raising a very high political barrier to the adoption of county-wide assessment (Article IX, section one).  Constitutional action would ease the path to shifting this function to the county level.

 

 

 


[1] New York State Office of the State Comptroller. ( 2011). Reducing the Cost of Tax Assessment Through Shared Services. Retrieved from http://www.osc.state.ny.us/localgov/pubs/research/snapshot/0511snapshot.pdf

[2]New York Const. art. V. §. 305. Retrieved from http://public.leginfo.state.ny.us/LAWSSEAF.cgi?QUERYTYPE=LAWS+&QUERYDATA=$$RPT305$$@TXRPT0305+&LIST=SEA62+&BROWSER=BROWSER+&TOKEN=22815364+&TARGET=VIEW

[3]Rosemary, S., & Hope, C. (2009). Assessing New York City's Property Tax—Yet Again. Manhattan’s Institute’s Center for Rethinking Development. Retrieved from http://www.manhattan-institute.org/email/crd_newsletter04-09.html

[4] . Council of State Taxation. “The Best and Worst of Property Tax Administration” (May, 2011) . Rereived from http://www.cost.org/StateTaxLibrary.aspx?id=17768

[5] New York Assembly Bill A01572 (2008). Retrieved from http://assembly.state.ny.us/leg/?bn=A01572&term=2007

[6] http New York State Office of the State Comptroller. ( 2011). Reducing the Cost of Tax Assessment Through Shared Services. Retrieved from http://www.osc.state.ny.us/localgov/pubs/research/snapshot/0511snapshot.pdf

[7] New York State Office of the State Comptroller. ( 2011). Reducing the Cost of Tax Assessment Through Shared Services. Retrieved from http://www.osc.state.ny.us/localgov/pubs/research/snapshot/0511snapshot.pdf

[8] Robert, S. & Sean S. (2009, November). The Political Economy of the Property Tax: Assessor Authority and Assessment Uniformity. Paper presented at National Tax Association.

91st Conference, Austin, TX. Retrieved from http://www.andrew.cmu.edu/user/rs9f/nta982n.pdf

[9] New York State Office of the State Comptroller. ( 2011). Reducing the Cost of Tax Assessment Through Shared Services. Retrieved from http://www.osc.state.ny.us/localgov/pubs/research/snapshot/0511snapshot.pdf

[10] New York State Office of the State Comptroller. ( 2011). Reducing the Cost of Tax Assessment Through Shared Services. Retrieved from http://www.osc.state.ny.us/localgov/pubs/research/snapshot/0511snapshot.pdf

[11] New York State Office of the State Comptroller. ( 2011). Reducing the Cost of Tax Assessment Through Shared Services. Retrieved from http://www.osc.state.ny.us/localgov/pubs/research/snapshot/0511snapshot.pdf

[12] New York State Department of Taxation and Finance. (2011). Uniform Assessment Standards. Retrieved from http://www.tax.ny.gov/research/property/reports/ratio/uniformassmntstd/index.htm

[13] Indiana Department of Local Government Finance. Indiana Uniform Property Tax Management System—Feasibility Study. Presented to the Commission on State Tax

and Financing Policy (http://www.in.gov/legislative/igareports/agency/reports/STFP01.pdf

[14] Indiana Department of Local Government Finance. Indiana Uniform Property Tax Management System—Feasibility Study. Presented to the Commission on State Tax

and Financing Policy (http://www.in.gov/legislative/igareports/agency/reports/STFP01.pdf

[15] Consolidate Assessors. (2011). The Leader Herald. Retrieved from http://www.leaderherald.com/page/content.detail/id/537332/Consolidate-as...

[16] Sullivan County. (2009). Centralized Property Tax Administration Program Assessment Study. Presented to the Sullivan County Legislature.  

[17] Sullivan County. (2009). Centralized Property Tax Administration Program Assessment Study. Presented to the Sullivan County Legislature.  

 

 

 

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